HOUSTON CHRONICLE ARCHIVES



Paper: HOUSTON CHRONICLE
Date: SAT 07/13/85
Section: BUSINESS
Page: 1
Edition: NO STAR

Two-tier salaries gaining support

By DAN DORFMAN

BESET WITH COST OVERRUNS in his defense budget in 218 A.D., the Roman emperor Macrinus came up with what he thought was a clever solution. He decided to pay new recruits at a lower rate than his experienced soldiers. The plan turned out to be a flop: The army revolted and Macrinus was beheaded.

The idea of a two-tier labor system has survived, however. In fact, it is rapidly picking up support in this country and may eventually reshape the way salaries and benefits are paid to future employees - especially those earning $40,000 a year or less. Just recently, United Air Lines wrapped up a new labor pact that gives starting pilots $1,800 a month in their first year and $2,200 a month in their second. By contrast, the previous contract called for starting salaries of $1,871 a month, rising to $3 ,646 a month the second year.

Under a two-tier-labor system, current employees, in effect, would sell out future workers. New employees would be discriminated against in wages, benefits, or both. For example, new employees may start at a lower salary than old employees did, receive lower wage hikes than old employees do, wait longer for pay hikes, and never reach the top wage levels of the senior employees. In other possible cases, new employees may have to wait six to nine months before being covered by a company medical program, or they may be required to pay a portion of their medical benefits for a period of time before the employer assumes the expense.

Basically, the new worker can no longer expect the benefits of the last 30 to 35 years of negotiated contracts, says Jerry Glassman, managing partner of Grotta, Glassman & Hoffman, a New Jersey labor law firm that represents management.

One of four to be under system Glassman calculates that 23 million Americans, or nearly one out of every four workers, will fall under the two-tier system by the end of next year. Half the country's workers will be two-tier within seven to ten years, he says. Why? Because of deregulation and growing competition from cheaper labor both in the Sunbelt and abroad. Workers will have little choice, Glassman maintains. More and more companies will be forced to adopt two-tier, he says.

Some retailing, insurance and milk-delivery businesses have already gone two-tier, and Glassman sees the system spreading rapidly in the textile and apparel fields, data processing, and warehousing. In line with government cost cutting, government employees will also be affected, Glassman says.

For management, a two-tier system is an obvious way to cut costs. For labor, Glassman outlines various pros and cons. Older employees are able to preserve their contract gains, but a two-tier system makes them targets for dismissal, as management tries to eliminate the most expensive employees. The lower costs of the two-tier system may help open up jobs for new employees, but on the other hand - and it's a painful caveat - those employees may never get equal pay.

Carbide next for Pickens? Union Carbide, the nation's third largest chemical producer, may be the next takeover target of corporate raider T. Boone Pickens Jr.

Talk was rife on Wall Street Thursday that Mesa Petroleum, headed by Pickens, has been a sizable buyer of Union Carbide shares.

Speculation of a Pickens run at Union Carbide sparked heavy trading in the company's shares Thursday, which rose 1 5/8, to 48 1/2, on a brisk turnover of 1,434,000 shares. It was the big board's fourth most active stock. On Friday Union Carbide gained 1 to 49 1/2.

Pickens declined comment. Union Carbide said it knew of no activities to account for the action in its shares. A big position in Union Carbide - 5.4 percent - is already held by the Bass Brothers, the Texas billionaires.

At Thursday's closing price, a takeover of the company, with 70.4 million shares outstanding, would run close to $3 .5 billion. Presumably, though, a takeover price well above that would be likely, given Union Carbide's book value of nearly $70 a share at year end '84.

A big question mark, of course, is the company's liabilities from the tragedy at its Bhopal plant in India, which took an estimated 2,000 lives.

Union Carbide last year earned $364 million, or $5.16 a share, on sales of $9.5 billion. Aside from its chemical operations, Union Carbide's product line includes Eveready batteries, Prestone anti-freeze, Gladwrap and bags, and Simonize waxes. It operates in 37 countries, and last year's foreign operations accounted for 29 percent of total sales.